The document provides information to calculate earnings per share (EPS), dividend yield, price-to-earnings (P/E) ratio, and explains the Capital Asset Pricing Model (CAPM) for Vodafone for different years. It also provides a question asking to calculate intrinsic value, value per share on dividend yield basis, and value per share on EPS basis for different categories of equity shares in a company using data given.

1. 1) From the data given below, you need to calculate the EPS for Vodafone
and then calculate it for the two years for which you have data.
Ans :
Calculation of the EPS for Vodafone :
Earnings per share = (Net income – Dividends on preferred stock) ÷ Average
number of shares outstanding
Profit for the financial period -16155.0 -9885.0
Weighted average number 65012501146 61334032162
of shares in issue in the
period
EPS -2.48 -1.611
Analyzing the EPS of VODAFONE; For every share, ordinary shareholders
have lost 25 pence in 2002 and they lost 16 pence in 2001.
2) Take the latest prices for Vodafone's shares from either Yahoo or Reuters
and rework the dividend yield value for Vodafone.
Ans :
Vodafone's shares price 174.10
The cost of equity capital is Rs 174.10
Realized yield Approach
This approach takes into consideration the basic factors of the D/P + g
approach but, instead of using the expected values of the dividends and
capital appreciation, past yields are used to denote the cost of capital. This
approach is based upon the assumption that past behavior will be repeated in
future and, therefore, may be used to measure the cost or ordinary capital
The realized return over n-years period is calculated as (w1*w2*w3*….n)1/n

2. Where Wt, referred to as the wealth ratio, calculated as (Dt + Pt )/Pt-1 and t =
1,2,3…….n
Dt = DPS for t payable
Pt = Price per share at the end of t year
4) Using the data given below find the relevant data for Vodafone and
calculate its P/E ratio.
Ans : market price of Vodafone pls 174.10
EPS 2.48
PE ratio 174.10/2.48= 70.2
5) Explain Capital Asset Pricing Model (CAPM) with formula and
illustration.
Ans : A model that describes the relationship between risk and expected
return and that is used in the pricing of risky securities.
The general idea behind CAPM is that investors need to be compensated in
two ways: time value of money and risk. The time value of money is
represented by the risk-free (rf) rate in the formula and compensates the
investors for placing money in any investment over a period of time. The
other half of the formula represents risk and calculates the amount of
compensation the investor needs for taking on additional risk. This is

3. calculated by taking a risk measure (beta) that compares the returns of the
asset to the market over a period of time and to the market premium.
Using the CAPM model and the following assumptions, we can compute the
expected return of a stock in this CAPM example: if the risk-free rate is 3%,
the beta (risk measure) of the stock is 2 and the expected market return over
the period is 10%, the stock is expected to return 17% (3%+2(10%-3%)).
Q.1 You are required to calculate the following for each one of the three
categories of equity shares ppearing in the above mentioned Balance Sheet:
a) Intrinsic value on the basis of book values of Assets and Liabilities
including goodwill;
What Does Intrinsic Value Mean?
1. The actual value of a company or an asset based on an underlying
perception of its true value including all aspects of the business, in terms of
both tangible and intangible factors. This value may or may not be the same
as the current market value. Value investors use a variety of analytical
techniques in order to estimate the intrinsic value of securities in hopes of
finding investments where the true value of the investment exceeds its
current market value.
2. For call options, this is the difference between the underlying stock's price
and the strike price. For put options, it is the difference between the strike
price and the underlying stock's price. In the case of both puts and calls, if
the respective difference value is negative, the instrinsic value is given as
zero.

4. Goodwill 420
Other Fixed Assets 11166
Current Assets 2910
Loans and Advances 933
Total 15429
Less: Secured loans 4500
Current liabilities 1242
Provisions 960 6702
8727
Add: Notional call on 90 lakhs
equity shares @ Rs. 2 per share 180
8907
(b) Value per share on dividend yield basis:
Value of fully paid-up share of Rs. 10= 20/15* Rs. 10=Rs. 13.33(approx)
Value of partly paid-up share of Rs. 8 =20/15*Rs. 8=Rs. 10.67(approx)
Value of fully paid-up share of Rs. 5=20/15*Rs.5 = Rs. 6.67(approx)
(c) Value per share on the basis of EPS:
Given : Profit after tax = Rs. 1,371 lakhs ,
180 lakh equity shares of Rs. 10 each, fully paid up,90lakhequity
shares of Rs.10 each, Rs. 8 paid up150 lakhs equity shares of Rs. 5 each,
fully paidup. ,Reserves and surplus total of 3270 lakh
EPS of share capital 1371/3270 = 0.419
Earning per fully paid share of Rs. 10 = Rs. 0.419 * 10 = Rs. 4.19
Rs. 0.419 * 8=Rs. 3.352
Rs. 0.419 * 5= Rs. 2.095